Equity funds have seenlargest outflows in more than three years, according to new research.
UK still out of favour, as investors pull another £700m and UK Smaller Companies outflows slow, as market rebounds.
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Investment Association figures:
“Equities saw their biggest outflows in September since the aftermath of the EU referendum back in 2016, with £1.7bn pulled from equity funds by investors. This takes total outflows for equity funds over the past three months to close to £5bn. The UK continued to be hardest hit, while the only bright spot for inflows in September was emerging markets, which saw £270m of inflows.
“September was a month where everyone learnt the word proroguing and saw yet more heated Brexit wrangling, unsurprisingly this did little to encourage investors to put their backing behind the UK, and we saw £676m of outflows from UK equity funds in the month. The tally of outflows since the Brexit vote keeps ratcheting up, and is now within touching distance of £15bn – leaving quite a hole in UK fund managers’ portfolios.
“The UK All Companies sector clocked up almost £500m of outflows. The sector has seen just two months of inflows over the past two years, and during that time the FTSE All Share has risen just 8%.
“Investors also continued to ditch their investments in smaller UK companies, at a more modest pace than previous months with £61m of flows out of small companies funds in September, perhaps buoyed by the turnaround in the market in recent months. So far in the year to the end of September the FTSE 250 has performed better than the FTSE 100, gaining by 17% compared to 14%, largely due to a rally in the past two months.
“Absolute Return funds continued to be the black sheep of the fund industry, with investors shedding another £200m of the funds in September. Absolute Return managers will be feeling the pinch, as they’ve collectively lost more than £6bn of assets in the past year. On average the funds have returned just 3% in the year so far, but the worst performer has handed investors a 21% loss while the top performer has delivered 13% returns.
“After chunky outflows in August investors returned to their love of bonds in September, with Strategic Bond funds clocking up £721m of inflows in the month. The Bank of England’s plans on interest rates remain hinged on the outcome of Brexit, so it makes sense that investors are shunning making a call on bonds in favour of outsourcing it to the professionals.”